The NY Times DealBook has an in-depth look at a years-old legal battle between a Massachusetts nursing home and a man whose mother was killed by her roommate at that home back in 2009.
The son is trying to sue the home, alleging that it disregarded signs that his mother’s roommate posed a threat to others. However, his initial attempts at bringing the lawsuit failed because he had unwittingly signed away his right to file a legal complaint.
When his mother had moved into the home, the son — her medical proxy — signed the contract on her behalf. That contract included a binding arbitration clause, which bars all the parties in a contract from going to court to resolve legal disputes, even wrongful deaths.
Instead of a courtroom, such complaints must be handled through an outside arbitration process that has repeatedly been shown to be out-of-balance in favor of the companies that draft the contracts, given their familiarity with the process and with the arbitrators.
For example, the Times notes that the arbitration firm hired to hear this dispute has handled more than 400 arbitrations for the law firm representing the nursing home company.
However, courts have long been reluctant to overrule these clauses, even when it’s been shown that the person signing the contract could have had no idea what they were agreeing to.
So it’s not surprising that when this matter went to arbitration, the ruling came down in favor of the nursing home. And because this was a private arbitration matter, no explanation was given by the arbitrator. He merely checked off a box indicating his decision.
But last year, lawyers for the son were successfully able to convince a state court that the son was not legally able to sign away his mother’s right to sue, because he was only her medical proxy. Their contention is that he would have needed power of attorney in order to sign a legally binding contract on his mother’s behalf.
The son’s case is slated to go before the court next month. It could stand as precedent for others trying to challenge an arbitration clause in a nursing home contract.
This sad story also illustrates why it’s so important for you to review contracts for arbitration clauses before you sign them. Once a contract is signed, it’s very difficult to undo, especially now that the U.S. Supreme Court has repeatedly upheld the use of forced arbitration.
Earlier this month, Sen. Patrick Leahy of Vermont and Sen. Al Franken of Minnesota introduced the Restoring Statutory Rights Act, which would create an exception in the 1925 Federal Arbitration Act for disputes involving individuals and small businesses.
Under that proposed law, which sadly stands little chance of passing, the only way individuals would enter into arbitration is if they agreed to do so after a legal dispute has been filed. That’s very different from the current process, which automatically shunts all customer disputes into binding arbitration.